Why Do Small Estates Need Estate Settlement Services?

Even estates valued at less than $150,000 still need settlement services to handle estate settlement costs and estate distribution.

As of 2015, estates of less than $5.43 million are exempt from estate taxes. With the federal estate tax issue settled, a vast number of Americans will never have to worry about paying Uncle Sam a dime when they pass. This would lead many to believe that there is little if any reason to do any estate planning at all. On the contrary, at the Law Offices of Dan Chern, we are finding ourselves consulting with more and more families who need estate settlement services. Why?

Estate Settlement Costs

No matter the size of your estate, there is an extensive list of estate settlement costs that must be paid off. The most cost-effective and easiest solution to covering these expenses is by having life insurance. But if there is no insurance in place, what are the alternatives?

When an estate has to be settled, there will be numerous costs that must be paid, such:

  • Funeral costs
  • Possible medical expenses to a hospital or care facility
  • Credit card or loan debt
  • Legal fees
  • Income taxes
  • Property taxes
  • Miscellaneous fees

Average funeral costs can be as little as $4,000 or as high as $10,000, depending on the services chosen. End of life hospital bills or long-term care costs, can be as minimal as $10,000 and climb to more than $100,000. Besides these immediate bills, there is also the possibility of needing to resolve debt from a mortgage, school loans, and recurring bills to immediate family along with unfunded educational costs. If all that is not enough, there are still accounting fees, appraisal fees, legal fees, and fees for executor or trustees.

If the estate is small, it’s almost certain that these expenses will take a great deal of the estate, leaving little if any inheritance for the family or loved ones. Which assets will you sell to pay these bills? When you think of an estate sale, most buyers know that this is an opportunity to purchase items a lot cheaper than if they were buying it at retail or from a private individual.

What about probate?
Many clients I speak with think that having a will eliminates probate. Sadly, this is not the case. Probate expenses in Texas for estates less than $100,000 can average $2500 or more, which will further deplete assets from the estate that were meant to pass to the heirs. If it takes more than 3 months to probate the estate, there is the possibility of additional costs. Which assets will be liquidated to pay for these expenses?

The good news is that you can avoid probate altogether by establishing a properly funded living trust. Yes, even if you have a small estate you can benefit from the creation of a living trust.

Estate Distribution

Beyond the financial aspects of settling an estate there can be issues when the division of the assets cannot be easily divided among the heirs. If certain assets have not been liquidated, heirs will be forced to decide on how best to sell them and be willing to possibly accept a lesser value than what was originally intended.

What happens when there is a business interest to divide?
Many times certain heirs just want their money out of the business and have no desire to own or be a part of operating the business. What happens when heirs don’t get along well or don’t like the executor? What is the best solution for eliminating potential squabbling after dividing the assets? Once again, if you invest in a life insurance policy it can solve all these issues and prevent the need to liquidate assets.

If you’re in a second marriage, did you have children from the first?
How do you treat children from a prior marriage versus the children in a current marriage?
The best solution is creating Trusts which can be established for the benefit of all those you want as beneficiaries. Once you have your Trusts established, you should seriously consider funding them with life insurance. This takes away all the burdens of distributing your estate.

Do you have a beneficiary with special needs?
If you have a beneficiary with special needs, and need to provide for their care, you will want to set up a Special Needs Trust. Often times I work with clients who have children that receive government benefits, and if this child receives an outright inheritance, they will lose their benefits. A Special Needs Trust funded with life insurance or other liquid assets can provide the dollars needed for medical equipment, future medical treatment, and incidental expenses not covered by the government benefits.

What if I want to distribute my inheritance gradually over time?
There has been an occasion where clients want to leave their beneficiary some inheritance but do not want the heir to receive their share immediately. Let’s be honest: not every heir is capable of handling any inheritance. Establishing a trust to distribute income to them over a period of time is a much better means of making sure they don’t squander the proceeds.

Customized Estate Planning Services

Without a doubt, it is important that clients plan for estate settlement regardless of the size. By making those smart choices early on, you can avoid costly expenses and conserve the assets for your loved ones.

As your legal counsel, I can help you minimize settlement costs while helping you save your hard-earned assets for your family and charities. Estate size should never be a consideration when it comes to discussing settlement costs and ultimately final distribution.

Call my office today at 972-516-9911 and ask for me Dan Chern. We can meet at your convenience and I’ll be happy to answer all your questions. Don’t leave anything to chance, make the decision today and control your future. If you would like to learn more about estate settlement services or other legal services I offer, please contact us for a free consultation.

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